Financial experts are of two minds when it comes to parents assisting their adult children financially: in one sense, they want to help, on the other, they aren't sure whether to get involved at all.
"It can be a great idea or a terrible idea, depending on the circumstances," says Rebecca Pavese, a financial planner with Palisades Hudson Financial Group's Atlanta office.
No matter what, parents shouldn't let any family "financial aid" take their own long-term savings out of whack. "Never let helping your child jeopardize your retirement," Pavese says.
Perhaps the main issue with financial aid to adult children is how to structure the payout. Specifically, should the money be a gift or a loan?
Pavase comes down on the side of loans over gifts.
"It's a good way to foster both independence and responsibility for someone planning to buy a car or a home," says Pavese, who says she has helped several clients loan money to their adult children. "It's also a wise choice if you can't afford to give away a lot of money, but can afford to make a loan."
Loans over gifts have some definite advantages. "With so-called intra-family loans,' children pay less than they likely would if they borrowed from a bank, and you can earn a decent return while helping your children help themselves," Pavase adds.
Pavase offers a two-step process to get the family financial aid deal done the right away.
